Seven City Economic Regions to be set up in 5 years; Surat, Varanasi, Vizag among cities to benefit

In her speech, the Finance Minister underlined the importance of the economic development of cities, including CERs as one of the six key areas in her speech.

“To accelerate and sustain economic growth, I propose interventions in six areas: Scaling up manufacturing in seven strategic sectors, rejuvenating legacy industrial sectors, creating champion MSMEs, delivering a push for infra, ensuring long-term security and stability, and developing city economic regions,” she said.

Sitharaman said cities were the engines of growth, innovation and opportunities. “We shall now focus on Tier-2, Tier-3 cities and even temple towns, which need modern infrastructure and basic amenities,” she added.

In order to unlock the potential of cities, she said CERs would be mapped based on their specific growth drivers and an allocation of Rs 5,000 crore per CER over five years was proposed. The projects would be implemented through “challenge mode” (which entails a competition among the cities),” she said.

The Budget allocated Rs 85,222.39 crore for the Union Ministry of Housing and Urban Affairs in 2026-2027, which was 49.5% higher than the revised estimate (RE) of Rs 57,203.78 crore in 2025-2026, but an 11.93% decrease from the Budget Estimate (BE) of 2025-2026 (Rs 96, 777 crore). In 2025-2026, the RE shows a reduction of 40.89% compared to the BE. The Budget increased the allocation for non-residential general pool accommodation from Rs 2,922.56 crore the previous year to Rs 4,000 crore, reflecting the ongoing construction of the Central Vista projects.
Allocation for the Prime Minister’s Street Vendors’ Atmanirbhar Nidhi (PM SVANidhi) scheme was hiked from Rs 373 crore in the BE and Rs 571.98 crore in the RE 2025-26 to Rs 900 crore for 2026-27. Allocation for the interest subsidy scheme under Pradhan Mantri Awas Yojana-Urban 2.0 was decreased from Rs 3,500 crore to Rs 3,000 crore.

In her Budget speech last year, the Finance Minister had announced the establishment of an Urban Challenge Fund of Rs 1 lakh crore to carry out projects for “cities as growth hubs, creative redevelopment of cities, and water and sanitation”. An allocation of Rs 10,000 crore had been proposed for 2025-2026. A year on, the fund is yet to be operationalised, with Union Ministry of Housing and Urban Affairs sources saying the rules for the challenge are pending approval. In the Budget 2026-2027, Rs 10,000 crore was allocated for the Urban Challenge Fund again.